The Dominoes Are Falling: A Sharp Market Correction May Be Ahead
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Micron: profits soared at an incredible pace
The earnings report from the largest U.S. memory chip manufacturer was met with heightened expectations after industry players became the biggest beneficiaries of the expansion of AI infrastructure. However, the results published after the market closed yesterday still exceeded expectations and were accompanied by a similarly strong forecast. In addition, management outlined a favorable long-term outlook, based on which it is not yet clear when the balance between supply and demand in the industry might be restored. In light of this, we continue to view the company’s fundamental outlook as strong and are maintaining it on our Equity Top Pick list.
Commodities - Technical Analysis
Gold and silver continued their correction, breaking through key support levels, which could push back the likelihood of a turnaround by several weeks. Oil’s correction is slowly approaching its first significant support level, so the market’s reaction to this zone will be crucial. The rapid rise in natural gas prices has already stalled, but the price remains above the uptrend line. Copper is likely to trade within a wider range, so oversold and overbought zones could present trading opportunities. Wheat and corn prices continued to move within a correction phase, so no new buy signals have emerged yet.
The major U.S. equity indices have remained in a corrective and consolidation phase for several weeks, while small-cap stocks are increasingly displaying signs of a developing downtrend. With this week's Federal Reserve interest rate decision approaching, it is hardly surprising that uncertainty surrounding the future path of monetary policy has weighed modestly on investor sentiment and equity markets in recent weeks. Should the key support levels now come under pressure and ultimately fail, the markets could be vulnerable to a more pronounced corrective move. Investors are expected to gain greater clarity following Wednesday's Fed announcement, which may provide fresh guidance for market direction in the months ahead. At present, however, high-quality bullish setups remain scarce, with only a limited number of stocks exhibiting the technical characteristics typically associated with sustainable upside potential.
Best rated US stocks based on momentum ranking
Compelling technical picture:
Although the momentum-based screening process continues to identify a number of stocks, their overall technical picture does not provide sufficiently convincing buy signals. Therefore, we are not issuing a new stock recommendation this week.
List of stocks with a chance of a turnaround in the coming weeks
Most popular US stocks
The momentum model supports the creation of a technical based stock list that helps to find shorter-term trading opportunities. The model can be used to identify stocks that show reversal signals following more sustained falls/underperformance. We examine one-year, six-month, three-month, one-month and five-day momentum values, which are used to rank the stocks under consideration. The higher a stock is ranked in the order, the better it technically performs relative to the others. The change in the ranking over time is used to determine the life cycle of the stock.
- In the first table, we collect the stocks that show the most attractive picture compared to the others in a given week based on momentum factors, of which those are also presented in a separate chart where a favourable situation can be identified based on additional technical analysis tools.
- In the second table, we list the stocks that are already worthy of being placed in watchlist status. They are not among the best performers, but they have the potential to improve and signal a turnaround in a few days or weeks.
- In the third table, we have also collected the more popular stocks to help identify their position in the momentum order.
The report shows the results of a technical - quantitative based stock screening, which does not examine the fundamental background/value of the companies. For this reason, risk management/position sizing rules should be designed accordingly.
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